Forex Trading Reality Check

Many individual traders are lured in by high leverage, low minimum deposit requirements and the promise of living the dream as a forex day trader.  Well, let me give you a bit of a reality check when it comes to the forex trading business.  It may cause you to think twice about heading in flippantly.

First of all, the high leverage that many brokers offer are very attractive as you imagine the profits you could make on such ratios as 1:100 or 1:200 margins.  What most new forex traders fail to consider is the downside risk of such leverage as well.  This is what makes forex trading one of the riskiest financial activities in the world.

Secondly, most traders don’t consider the commissions, fees, spread and slippage that you will inevitably face in the market.  Even if you have a solid forex trading strategy that consistently makes money on paper, once you include the fees and spreads, you may be lucky to break even.

Thirdly, most forex trading systems that you read and hear about don’t work.  Well, they may work, but they don’t work the way most of the represent themselves to work.  They are usually much hard to make work that you realize, if at all.

Just think about it.  If these systems were as easy as they say it was, how come they’re not making millions off of it?  If they are, why are they spending time and money peddling it to you rather than trading the system themselves?

Forex trading is a very complicated business.  And it only gets more complicated as you add more strategies.  For example, most experienced traders use currency options at some point.  So now, not only are you juggling a regular trading position, you are also managing a currency options trade.  That is multi-tasking on steroids, but it’s essential if you want to make money on the forex market.